RBI Cuts Repo Rate For Fourth Time This Year, EMIs Set To Get Lower

The Reserve Bank of India's Monetary Policy Committee (MPC) headed by Governor Shaktikanta Das today delivered its fourth repo rate cut in a row and maintained its accomodative stance. The MPC cut the repo rate, which is the key interest rate at which it lends short-term funds to commercial banks, by 35 basis points or 0.35 percentage point to 5.40 per cent, the lowest in over nine years, to spur economic growth. After the repo rate cut by the Reserve Bank of India, equated monthly installments (EMI) for home and other loan borrowers are set to come down, say analysts.

The decision of the Monetary Policy Committee to cut repo rate was unanimous, with four members voting to cut rate by 35 basis points and the rest voting for a 25-basis-points reduction.

The Reserve Bank of India cut gross domestic product (GDP) growth target for current financial year to 6.9 per cent from 7 per cent in the June policy. The range of GDP growth is projected at 5.8-6.6 per cent for first half of 2019-20, and 7.3-7.5 per cent for second half "with risks tilted to the downside", the Reserve Bank of India said in its third bi-monthly policy statement of the current financial year.

Meanwhile, the Reserve Bank of India projected consumer inflation at 3.1 per cent in the second quarter, and 3.5-3.7 per cent in the second half of the current financial year, both below its medium-term goal of 4 per cent.

The last time the RBI made so many back-to-back cuts was after the global financial crisis over a decade ago, when most major central banks were desperate to revive economic growth.

With today's rate cut the Reserve Bank of India has become the most dovish Asian central bank, according to analysts.

Almost 80 per cent of 66 economists surveyed by news agency Reuters had expected the RBI to cut its benchmark repo rate by 25 bps. Three respondents predicted a 50 bps cut and the remaining 10 forecast the rate would be left unchanged.

(With inputs from Reuters)